Stocks are falling and the euro is shrinking due to the energy crisis

A man walks under an electronic screen showing Japan’s Nikkei stock price index inside a conference hall in Tokyo, Japan, June 14, 2022. REUTERS/Issei Kato

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  • Euro nears 20-year lows as Russia shuts gas pipeline
  • EUROSTOXX futures dip, S&P 500 futures steady
  • Oil prices rise as gas rises, OPEC + meets

SYDNEY (Reuters) – European stock futures fell on Monday as the euro experienced a fresh leak after Russia shut down a major gas pipeline to Europe, prompting some governments there to announce emergency measures to ease the pain of rising energy prices.

The euro lost 0.3% to $0.9918 and looks likely to test a 20-year low at $0.99005, as markets are exposed to higher risks of a European recession. Read more

EUROSTOXX 50 futures are down 3.0% and FTSE futures are down 1.1%.

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Germany announced plans to spend 65 billion euros ($64.7 billion) to protect customers and businesses from rising costs, while Finland and Sweden offered liquidity guarantees to keep electricity companies open. Read more

Oil prices jumped along with the entire energy complex as the holiday in the US markets weakened trading conditions. News of more coronavirus shutdowns in China only added to the jittery mood, with blue chips (.CSI300) by 0.6%. Read more

MSCI’s broadest index of Asia Pacific shares outside Japan (MIAPJ0000PUS.) Down 0.4%, Japan’s Nikkei (.N225) It was 0.2%.

Wall Street did slightly better after actually falling late on Friday, with S&P 500 futures up 0.2% and Nasdaq futures up 0.1%.

The energy crisis is an additional complication for the European Central Bank as it meets this week to consider how much to raise interest rates. Read more

“Europe is facing a poor energy outlook, with many anecdotes of companies cutting production,” said Tapas Strickland, head of market economics at NAB.

“The European Central Bank will undoubtedly decide to raise interest rates this week,” he added, “markets are approaching full pricing in a 75 basis point hike after several ECB officials said they are leaning in that direction, although it is still a long way off.” There will likely be a 50 vs 75 debate.”

Euro, Stirling struggle

The central banks of Canada and Australia are also expected to raise interest rates this week, while Federal Reserve Chairman Jerome Powell and several other policy makers will appear and are likely to sound hawkish on inflation.

While the US jobs report for August showed some welcome signs of a slowdown in the labor market, investors are still leaning towards a 75 basis point raise from the Federal Reserve this month.

The two-year US Treasury yield fell by nearly 12 basis points on Friday and futures were flat on Monday amid public risk aversion.

The US dollar benefited from the shift to safety once again, hitting a two-decade high against a basket of major currencies at 110,040.

The dollar was flat at 140.20 yen, just below Friday’s 24-year high of 140.80.

The British pound was struggling at $1.1485, after diving as deep as $1.1458 and levels last seen in March 2020 at the start of the pandemic.

Jonas Goltermann, chief economist at Capital Economics, said: “We now expect EUR/USD and GBP/USD prices to reach $0.90 and $1.05, respectively next year as the economic slowdown and the terms of trade shock hitting the region weigh on the region. “.

Britain’s Foreign Secretary Liz Truss said on Sunday she would embark on immediate action in her first week in office to tackle rising energy bills and increasing energy supplies if, as expected, she was appointed prime minister on Monday. Read more

A strong dollar kept gold steady at $1,710 an ounce.

Oil prices were supported by expectations that gas prices will jump in Europe later today.

“Ultimately, Germany will need to cut natural gas consumption by 15% to keep gas storage facilities empty,” ANZ analysts said. “Gas rationing seems very likely, since even at 95% full, storage will only last for 2.5 months.”

OPEC+ meets on Monday and is likely to keep oil production quotas unchanged for October, although some sources will not rule out a small production cut to support prices that have fallen on fears of an economic slowdown. Read more

Brent crude rose $1.73 to $94.75, while US crude rose $1.63 to $88.50 a barrel.

(Corrects the 20-year low against the dollar to $0.99005, not $0.90005, in the second paragraph)

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Reporting from Wayne Cole. Edited by Shree Navaratnam

Our criteria: Thomson Reuters Trust Principles.

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